I. Tolmacheva An overview of budget legislation adopted in December In December, a number of alterations were introduced in existing budget legislation: the Budgetary Code underwent certain changes, in the part concerning the introduction of clarity in the procedure for distributing revenues between the federal budget, the budgets of subjects of the Russian Federation, and local budgets; changes were made to the Federal Law “On the budget classification of the Russian Federation”, in the part concerning the clarification of certain conceptual categories; a number of annexes to the aforesaid Federal Law were newly worded, and changes were made in the Budgetary Code’s norms concerning RF budget classification, the classification of the sources of financing the deficits of RF budgets, and the departmental classification of the budget expenditures of subjects of the Russian Federation; some alterations were introduced in Government Decree No 249, in the part concerning the amending of the Regulations, established by the Decree, with Section VI “The granting of subventions for the development of leasing relations in the sphere of small business”; there was entered into force, from January 1, 2006, “The procedure for the cash service provided by the territorial bodies of the Federal Treasury for the purpose of executing the budgets of subjects of the RF and local budgets”; and changes were made in “The instruction on the procedure for composing and submitting the annual, quarterly, and monthly budget reporting” approved by Order of the Ministry of Finance, No 5n of 21.01.2005.

I. FEDERAL LAWS of the Russian Federation 1. “ON THE INTRODUCTION OF ALTERATIONS IN THE BUDGETARY CODE OF THE RUSSIAN FEDERATION”, No 159-FZ of 19.12.The law enters into force from January 1, 2006, except for Article 2, which enters into force from the day of official publication.

The Federal Law clarifies the procedure for the distribution of revenues between the federal budget, the budgets of subjects of the Russian Federation, and local budgets.

Thus, the excise on distilled gasoline is included in the lists of the tax revenues of the federal budget and the tax revenues of the budgets of subjects of the Russian Federation (Articles 50 and 46 of the RF Budgetary Code).

Excluded are the norms concerning the powers of the federal executive authorities, the executive authorities of subjects of the Russian Federation, and local self-governing agencies to grant tax credits, as well as the deferments and installment plans regarding the payment of taxes and other compulsory payments to the corresponding budgets.

The Federal Law presents a new version of Article 62 of the RF Budgetary Code “Non-tax revenues of local budgets”. The article is amended by the normative rates of payments due to local budgets for affecting the environment; for the acquisition, from local self-governing agencies, of licenses for retail sale of alcoholic beverages; and the deductions from proceeds obtained through selling or renting out state-owned plots of land designated for housing construction, which are situated within the boundaries of settlements, municipal okrugs, and also in the areas between settlements.

2. “ON THE INTRODUCTION OF ALTERATIONS IN THE FEDERAL LAW “ON THE BUDGET CLASSIFICATION OF THE RUSSIAN FEDERATION”, AND IN THE BUDGETARY CODE OF THE RUSSIAN FEDERATION”, of 22.12.2005, No 176-FZ The law enters into force from the day of official publication and is applied to the relations emerging in the course of drawing-up and executing the budgets of all levels, starting with the budgets for the year 2006.

The alterations introduced in Federal Law, No 115-FZ of 15.08.1996, “On the budget classification of the Russian Federation”, among other things, clarify the following conceptual categories: “the budget classification of the Russian Federation”, “the functional classification of the expenditures of the budget of the Russian Federation”, “the classification of the sources of internal financing to cover the deficits of the Russian Federation’s budgets”, and “the classification of the sources of external financing to cover the deficits of the federal budget and the budgets of subjects of the Russian Federation”.

There was introduced a provision that the agencies organizing the execution of the budgets of the Russian Federation were to have the right to adopt decisions as to amending the lists of targeted items and the types of expenditures within the functional classification of the expenditures of the Russian Federation’s budgets.

A number of annexes to the aforesaid Federal Law have received a new wording, e.g., Annex 2, “The classification of the revenues of the Russian Federation’s budgets”; Annex 4, “The list of the targeted items of the functional classification of the expenditures of the Russian Federation’s budgets”; Annex 7, “The classification of the sources of the internal financing of the deficits of the Russian Federation’s budgets”, and Annex 11.1, “The administrators of the receipts of the Russian Federation’s budgets”.

Also, changes were introduced in the norms of the RF Budgetary Code pertaining to the budget classification of the Russian Federation, the classification of the sources of financing to cover the deficits of the Russian Federation’s budgets, and the departmental classification of the budgetary expenditures of subjects of the Russian Federation.

II. Decrees of the Government of the Russian Federation 1. “ON THE INTRODUCTION OF ALTERATIONS IN DECREE OF THE GOVERNMENT OF THE RUSSIAN FEDERATION, No 249 OF APRIL 22, 2005”, of 09.12.2005, No The forms of state support for small businesses are supplemented with subventions for the development of the system of crediting and leasing relations in the sphere of small business, granted at the expense of the federal budget’s funds.

It has been established that the determination of the amount of subventions must be carried out on the basis of the amount of the budget resources of a subject of the Russian Federation, allocated in the year 2004 to finance the programs of support to small businesses, and on the number of small businesses registered in the territory of a subject of the Russian Federation as of January 1, 2005.

The Decree specified the list of documents to be submitted, on a non-recurring basis, to an authorized agency by the receiver of a credit for the purpose of obtaining the subsidies.

Also, some other peculiarities of the granting of subsidies and subventions for the support of small businesses were specified, including peasant (farm) entities, as was the case in the year 2005.

The regulations approved by Decree of the RF Government, No 249 of 22.04.2005, were amended by Section VI “The granting of subventions for the development of financial-lease relations in the sphere of small businesses”. It was established that subventions for the development of leasing relations in the sphere of small businesses should be allocated to subsidize a part of the expenditures incurred by small businesses, with respect to the payment of remuneration under a guarantee and the contracts of surety, concluded between small businesses and the organizations guaranteeing the implementation of obligations under the lease agreements concluded by lessors and small businesses in the year 2005 for the term of no more than 5 years. There was established a procedure for determining the allocation of subsidies to small businesses by authorized agencies. The Decree specified the list of documents that a small business was obliged to submit, on a non-recurring basis, to an authorized agency.

III. ORDERS, INSTRUCTIONS, AND RESOLUTIONS 1. Letter of the RF Federal Treasury “ON THE INTRODUTION OF ALTERATIONS IN THE PROCEDURE FOR THE CASH SERVICING OF THE EXECUTION OF THE BUDGETS OF SUBJECTS OF THE RUSSIAN FEDERATION AND LOCAL BUDGETS BY TERRITORIAL BODIES OF THE FEDERAL TREASURY, AS APPROVED BY ORDER OF THE FEDERAL TREASURY, No 1N OF MARCH 22, 2005”, No 42-7.1-01/51-35 of 05.12.2005, The Federal Treasury clearly stated that the Procedure for the cash servicing of the execution of the budgets of the Russian Federation’s subjects and local budgets by territorial bodies of the Federal Treasury, as approved by Order of the RF Treasury No 1n of 22.03.2005, was to enter into force from January 1, 2006, as amended by Order of the RF Treasury, No 18n of 07.11.2005.

In the aforesaid Procedure, the procedure for the switchover of the execution of the budget of a subject of the Russian Federation (or a local budget) to cash servicing by the bodies of the Federal Treasury was clarified. Apart from this, it also clarified the process of conducting and accounting the operations of crediting monetary funds to the single account of the budget of a subject of the Russian Federation (or a local budget) (cash receipts), and the operations for funds being written off the single account (cash payments).

Cash payments can be carried out:

1) with the opening and managing of a client account of the financial body (authorized body) of a corresponding budget;

2) with the opening of client accounts, to chief managers and to the managers and (or) recipients of the funds of a corresponding budget, so that they can carry out the accounting of operations with regard to budget expenditures in accordance with the Agreement on the performance, by the bodies of the State Treasury, of certain functions concerning the execution of the budget of a subject of the Russian Federation (or a local budget) under conditions of cash servicing, by them, of the budget’s execution.

As regards the second variant of cash payments, separate regulations were established - for the case when such payments are carried out on the condition that the bodies of the Federal Treasury should inform chief managers and the managers and (or) recipients of budgetary funds as to the volumes of expenditure financing; and for the case of carrying out cash payments being carried out on the condition that the above-listed subjects be informed as to the limits of budget liabilities and the volumes of expenditure financing.

Also, there were specified the forms of documents to be used at various stages of conducting and accounting the operations with regard to crediting monetary funds to the single account of a subject of the Federation and a local budget, and to their being written off thereof.

2. Order of the Ministry of Finance “ON THE INTRODUCTION OF ALTERATIONS IN THE INSTRUCTION CONCERNING THE PROCEDURE FOR DRAWING UP AND SUBMITTING ANNUAL, QUARTERLY, AND MONTHLY BUDGET REPORTS, AS APPROVED BY ORDER OF THE MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION, OF JANUARY 25, 2005, No 5N”, of 11.11.205, No 137n Changes were made in the Instruction on the procedure for drawing up and submitting annual, quarterly, and monthly budget reports, as approved by Order of the RF Ministry of Finance, No 5n of 21.01.2005.

In particular, it was established that budget reporting (except for summary and consolidated reporting) be composed not only on the basis of the data of the Ledger, but also on the basis of other registers of budget accounting.

There was introduced the rule that the Report on the execution of the budget of a chief manager (or a manager) and a recipient of budget funds be certified by the body which carries out the cash servicing of the execution of the budget.

It was pointed out that the Report should be composed separately as regards budget activity proper, and entrepreneurial or other revenue-yielding activity.

It was determined that the Report on Executing a Budget (f. 0503128) as of April 1, October 1, and January 1 of the year following a reporting year be composed on the basis of the consolidated References concerning non-cash operations related to budget execution (f. 0503129), consolidated Reports on the execution of the budget of a chief manager (or a manager) and a recipient of the budget funds (f. 0503127), submitted by the chief managers of the funds of a corresponding budget, and the Report on cash receipts and withdrawals (of the body organizing the execution of the budget) (f. 0503123).

Annex No 1 to the aforesaid Instruction in the part entitled “The List of the Forms of Annual, Quarterly, and Monthly Reporting, and the Timelines for Their Submission” was presented in a new wording.